1 The primary goal of a business firm is to A increase its p

1) The primary goal of a business firm is to A) increase its production. B) promote workforce job satisfaction. C) promote fairness. D) make a quality product E) maximise profit 2) When an economist uses the term \'cost\' referring to a firm, the economist refers to the A) opportunity cost of producing a good or service, which includes both implicit and explicit cost. B) price of the good to the consumer C) implicit cost of producing a good or service, but not the explicit cost of producing a good or service. D) explicit cost of producing a good or service, but not the implicit cost of producing a good or service. E) cost that can be actually verified and measured. 3) A normal profit is defined as A) the same thing as accounting profit. B) the economic profit minus the implicit costs. C) the return to entrepreneurship. D) total revenue minus implicit costs. E) total revenue minus explicit costs. 4) Which of the following is correct? A) The long run does not exist for some firms. B) The short run is the same for all firms C) The long run is the time frame in which the quantities of all resources can be varied. D) The short run for a firm can be longer than the long run for the same firm. E) The long run is the time frame in which all resources are fixed

Solution

1)

The primary objective of each firms in a market is to maximize profit given its cost constraint. The firm earn maximum profit by equating marginal revenue to its marginal cost. In the process some firms earn above normal profit and some earns normal profit.

Therefore, the correct option is: (E)

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2)

The accounting cost is the explicit cost of production that the firm must incur to employ the factor of production. The economic cost is implicit cost that includes accounting and well as opportunity cost of the production. The opportunity cost is the cost is the value of the next best alternative foregone in choosing a certain alternative. This is an economic cost and not included on the accounting cost.

Therefore, the correct option is: (A)

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3)

Normal profit refers to zero accounting profit. This occurs the firma otal revenue is equal to its total accounting cost.

Therefore, the correct option is: (E)

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4)

In the production process the firm works with two types of input. The inputs whose level cannot be changed over the short run is called the fixed input and those inputs whose amount can be changed over the short run is called the variable input. In the long run the amount of both fixed and variable inputs can be changed. Therefore, in the long run there are only variable inputs.

Therefore, the correct option is: (C)

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5)

In the production process the firm works with two types of input. The inputs whose level cannot be changed over the short run is called the fixed input and those inputs whose amount can be changed over the short run is called the variable input. In the long run the amount of both fixed and variable inputs can be changed. Therefore, in the long run there are only variable inputs.

In production total cost represents the cost of the input used plus the overhead cost of production. The total cost of production is thus given as fixed cost plus variable cost. Fixed cost is the cost of fixed input of production. The fixed inputs are dose that does not changes in the short run, such as land, capital etc. The fixed cost also does not depend on the level of input. The producers have to incur these costs even if the total production and sales is zero. Variable cost is the cost that varies with the level of output produced. It is the cost of inputs that vary in the short run, such as labor cost.

Therefore, the correct option is: (A)